Friday, June 5, 2015

Pandora Wins Appeals Court Ruling on Ascap Royalty Rates

Written by Ben Sisario

In Pandora Media’s second victory against the music industry in a week, a federal appeals court affirmed a judge’s ruling about royalty rates for the millions of songs represented by Ascap.

On Wednesday, just two days after Pandora received a favorable decision from the Federal Communications Commission over its efforts to buy a South Dakota radio station — a move that could allow Pandora to pay lower royalty rates to songwriters — the United States Court of Appeals for the Second Circuit, in New York, affirmed a ruling from Judge Denise L. Cote of United States District Court in New York that set a rate of 1.85 percent for the public performance of songs in Ascap’s catalog for Pandora and other Internet radio services.

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In another issue that has roiled the music industry, the appeals court also agreed with Judge Cote about the way that music publishers can make deals with Ascap to represent their songs. Pandora’s case against Ascap — a major clearinghouse for songwriting rights — had been precipitated by the publishers withdrawing digital rights to their catalogs, a move that forced Pandora to negotiate directly with the publishers, and resulted in higher royalty rates. Judge Cote ruled that this violated the terms of the federal regulations, known as a consent decree, under which Ascap has operated since 1941.

In a statement, Dave Grimaldi, a spokesman for Pandora, said, “We are pleased that the Second Circuit has affirmed Judge Cote’s ruling, which highlights the anticompetitive harms that can result from a lack of transparency into music ownership.”

Elizabeth Matthews, Ascap’s chief executive, said the ruling “affirms what we already know — that the Ascap consent decree and the rules that govern music licensing are outdated and completely out of step with the way people listen to music today.”

The Justice Department is reviewing the consent decrees that govern Ascap and its rival, BMI. Both organizations are governed by these regulatory documents, and their rate-setting procedures are overseen by federal judges. Ascap and BMI are both asking for changes to the regulations that, among other things, would officially allow partial withdrawal of rights.

On Monday, reviewing Pandora’s $600,000 deal to buy KXMZ-FM in Rapid City, S.D., the F.C.C. decided to waive a requirement that foreign ownership of a broadcast station cannot exceed 25 percent of the company’s shares. Pandora, which has been publicly traded since 2011, argued that it had no way of knowing who owned its stock.

That decision for Pandora removed the major hurdle for the company to complete its deal for the station, but the deal still awaits final approval by the F.C.C.

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